The Finance Professionals' Post educates readers in the finance and banking sectors on the forces that shape their business. The FPP is a publication of the New York Society of Security Analysts (NYSSA).

17 posts from March 2012

03/29/2012

Have you reached that place where you want a change in your career? Maybe you're meant to be an entrepreneur. Frank M. Deane, PhD, founder of Lumleian, gives his unique firsthand insight into transitioning a career into entrepreneurship. Deane talks about the rewards, challenges, and steps that go into starting one's own company.

Useful Highlights:

If you don't have a thoughtful strategy upfront, you're destined to fail.

Differentiation is key. You must understand your customers and how you can service them differently than anyone else.

Value creation, cost savings, and expediency are the main factors that keep customers satisfied and wanting to return.

A good business should be able provide services and/or products that are more efficient and standardized in order to set themselves apart.

03/28/2012

There are approximately two months left before the CFA exam is given in June. By this time, most candidates should have read through a good portion, if not all, of the curriculum and spent time studying what they’ve read. But how have they ensured that they really understand the material?

PRACTICAL STUDY TIPS:

Maybe they incorporated study advice and tips given by candidates who have already passed the Level II exam.

03/27/2012

Layoffs are happening. They are happening at Bank of America Merrill Lynch in equities and they are happening at Goldman Sachs, across all lines, but especially trading.

At Bank of America/Merrill Lynch, we are informed by Bloomberg that some senior equity traders have been let go after the bank informed employees in equity sales, trading and research, and that it was planning some layoffs in mid-March. Workers reportedly were told that the dismissals were meant to free room to hire outsiders while leaving headcount almost unchanged.

03/26/2012

Career advisors often focus on the resume as top priority for landing a job, but the interview is actually the most important factor. Once you get in the door, the invisible resume, or the way you present yourself, comes to the forefront. Career coach, Betsy Friedlander gives her insight on how perceptions and assumptions may be helping or hurting you in advancing your career.

Useful tips:

It is very important to be aware of the negative assumptions that could be made about you by your prospective employer.

If you know how you are perceived, you can create a dialogue that will allow you to explain yourself without changing who you are.

Even the traits that you perceive as your best qualities may come across negatively to an employer.

You should be more focused on connecting to the interviewer than worrying about what to say next.

It is completely acceptable to ask to start over and correct yourself if you do not like how an answer is coming out.

03/21/2012

Generation Investment Management’s recently released white paper calls for a “paradigm shift” to Sustainable Capitalism. It is an admirable and important contribution to the discussion about how to make individual firms more sustainable. Beyond this effort, we need the sustainable business community to join the ongoing systems level conversation about how to make the whole global economy truly sustainable, not merely less unsustainable. Without such a systemic shift, the sum of individual firm sustainability efforts will not translate into sustainable capitalism.

In the spirit of contemporary Chinese artist Ai Weiwei’s belief—quoted in Sustainable Capitalism—that “liberty is about the right to question everything,” we offer five questions as a beginning to this critical dialogue:

03/20/2012

The reality of the professional world is that unemployment is at an all-time high, career competition is brutal as an increased amount of experience professionals struggle to get interviews, and job stability is becoming a thing of the past. "The career esclator is jammed at every level." A changed financial career world has made adaptation to the future an urgent necessity, both for survival and advancement. Today's career advice is often riddled with sample cover letters and catchy words to use in resumes. Until now.

03/19/2012

Having a general understanding of cultures outside your own is more important than ever when competing in an increasingly global marketplace. Jie Xiu, of Troutman Sanders LPP's Corporate Group, discusses the misunderstandings that commonly arise in business dealings between China and the US due to cultural differences.

Points to consider:

Chinese contracts are often much shorter than US contracts because the language is very general compared with English.

In China, good intention is assumed without the expectation of specifying it in words. A US contract, with its specific language and lengthy clauses, may be perceived by the Chinese as a lack of trust.

Business in China is done on a more personal level, while in the US, it is more formal. Friendship must always come before doing business.

03/15/2012

Concerns have been raised, especially since the global financial crisis, about whether trading in credit default swaps (CDS) increases the credit risk of the reference entities. We use a unique, comprehensive sample covering 901 CDS introductions on North American corporate issuers between June 1997 and April 2009 to address this question. We present evidence that the probability of credit rating downgrade and the probability of bankruptcy both increase after the inception of CDS trading. The effect is robust to controlling for the endogeneity of CDS introduction, i.e., the possibility that firms with upcoming deterioration in creditworthiness are more likely to be selected for CDS trading. We show that the CDS-protected lenders’ reluctance to restructure is the most likely cause of the increase in credit risk. We present evidence that firms with relatively larger amounts of CDS contracts outstanding, and those with more “No Restructuring” contracts, are more likely to be adversely affected by CDS trading. We also document that CDS trading increases the level of participation of bank lenders to the firm. Our findings are broadly consistent with the predictions of the “empty creditor” model of Bolton and Oehmke (2011).

03/14/2012

Financial services is often seen as a young person’s game. The cliché goes that banks suck in thousands of college graduates each year and spit out wealthy retirees in their mid-40s, or even earlier.

So what happens when you lose your job at 40+? Is that it? Only if you want to it to be.

WHAT CAN YOU OFFER?

The first thing you need to do is to clarify what you can offer. What’s your value? Focus on what you can bring to a new employer which will make all the difference to their business. Define and articulate your experience in a way that is unique and will differentiate you from the competition.

03/13/2012

Zombies are most commonly known as undead, lifeless creatures that usually take hold of a living being through some type of supernatural force. However, as Yalman Onaran graphically illustrates in his new book, zombies can also inhabit the inanimate objects—in this case, banks. “Zombie Banks” are described as “insolvent financial institutions whose equity capital has been wiped out so that the value of their obligations is greater than their assets.” These are banks that have bankrupt balance sheets, and are kept alive by governments in the hope of avoiding financial and economic collapse.

03/12/2012

The announcement this week that a Merrill private banking team managing more than $1.4 billion for dozens of families, foundations, endowments, unions, and pension plans had joined advisor-owned HighTower was just the latest in a series of recent breakaways.

03/08/2012

When John Guerard, the special editor for this issue, was assembling the articles to be published, he asked Harry Markowitz to write the introduction. By the author’s own words, once he had completed that task he could see that his remarks were more like discussant comments than an introduction and could equally well be read after reading the articles.

03/07/2012

Over the past decade, the United States has legislated huge responses to national crises. Shortly after 9/11, the Patriot Act was passed by Congress. In the wake of Enron and other accounting scandals, Sarbanes-Oxley was introduced. Troubled Asset Relief Program (TARP) was released to address the mortgage crisis of 2008 and, as a result of the bailout and other issues prevalent throughout the financial industry, the Dodd-Frank Wall Street Reform and Consumer Protection Act was legislated in 2010.

Dodd-Frank aims to “promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail’, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”12

03/06/2012

Glenn Reynolds, CEO of credit research firm, CreditSights, Inc., presents his outlook on US economic and financial sectors. Despite the general discourse, US banks and the corporate field are in relatively good shape compared to previous projections. Rather than lack of ability, uncertainty is the main barrier to progress. Continued growth is unfortunately heavily dependent on the unstable economic situation in Europe. Overall, Reynolds believes US markets should be able to survive any hurdles that lie ahead.

03/05/2012

Most bloggers out there see their role as a one-man soap box—in which they can pontificate in a loud and singularly personal voice that breaks through the clutter and gives their readers no doubt where they stand.

When it works it is great, but many times it comes off as bombastic. Bloggers may feel obligated to take strong opinions when the evidence demands a more modest approach.

03/01/2012

At a US Senate Budget Committee hearing in March 2009, Federal Reserve Board Chairman Ben Bernanke declared that “If there’s a single episode in this entire 18 months that has made me more angry, I can’t think of one, than AIG.” Chairman Bernanke was referring to the $550 billion worth of insurance that AIG had written on so-called AAA-rated securities with little or no capital, putting the stability of the world financial system at risk.

THE NEED TO REFORM HOUSING FINANCE IN THE UNITED STATES: WHERE'S THE OUTRAGE?

Chairman Bernanke should have been even more outraged at the government-sponsored enterprises (GSEs) of the United States, Fannie Mae and Freddie Mac. Together these enterprises wrote $3.5 trillion worth of insurance—seven times that of AIG—on mortgage-backed securities (MBS) much riskier than AIG’s; they also made a portfolio investment in another $1.5 trillion in mortgages and MBS, a significant proportion of which was again of dubious quality. How much capital did regulators require to support that $3.5 trillion in insurance? Just a little over $15 billion—a very small fraction in the face of bearing the inherent credit risks on a third of the entire residential mortgage market in the United States.